Pensions and self-employment
This page looks briefly at some of the main types of pension that you may be able to have. If you want more information on any of them, we suggest you go to our tax basics section.
Pensions for the self-employed
Pensions are a type of investment plan allowing you to save up for later in life.
Employers are obliged to have a minimum level pension scheme in place for workers aged 22 and over who earn more than £10,000 per year (in 2023/24) under the auto-enrolment rules.
‘Worker’ is a legal term rather than a tax term. Workers are generally employees, but sometimes you can be self-employed for tax purposes but still be classed as a worker for employment law purposes. You can read more about this on the page Am I employed, self employed, both or neither?.
Some information about what is meant by being a ‘worker’ for this purpose can also be found on GOV.UK.
Therefore, in some circumstances you could be a worker for employment law purposes, which includes auto-enrolment, but be self-employed for tax purposes.
As there is no auto-enrolment requirement for the self-employed who are not workers, it is up to you to consider how you might save for your retirement and you may well choose to make provision for yourself.
Growth on your pension savings is generally free of tax. When pensions are paid out, they are usually taxable, but you should be able to take some part of the pension as a tax-free lump sum.
We cannot advise which type of scheme might be best for you, nor whether or not you should pay into a particular pension.
What are the different types of pension scheme?
What is the state pension?
The government pays the state pension as a regular payment to eligible people who have reached state pension age. You can work out when you will reach state pension age by using the calculator on GOV.UK.
If you are self-employed, paying Class 2 National Insurance contributions (NIC) helps you to qualify to receive the state pension.
There is more information about the state pension in our tax basics section.
Can self-employed people sign up to auto-enrolment pension schemes?
Although there is currently no way of self-employed people being automatically enrolled into a pension, some of the low-cost pension schemes that are used by employers for their employees are also open to the self-employed.
What are stakeholder and personal pensions?
A personal pension plan is a way of saving regularly for your retirement. You can set one up yourself and invest in it personally. The funds in the scheme are invested to save up for when you retire. You can get a personal pension or stakeholder pension (which is a specific kind of personal pension) from financial services companies such as insurance companies, bank and building societies (known as 'providers').
There is more information about stakeholder and personal pensions in our tax basics section.
What are retirement annuity schemes?
If you took out a personal pension policy before 1 July 1988, this would have been called a retirement annuity policy.
There is more information about retirement annuity schemes in our tax basics section.
What are the rules for paying into pensions?
The tax relief you can get on pension savings is limited.
You can save in more than one pension scheme at the same time, for example in two different personal pension schemes; or if you are self-employed and also employed you can save into a personal pension scheme as well as in your employer's pension scheme.
When can I take my private pension?
Generally, the earliest you can take your personal pension is at age 55 (rising to age 57 from April 2028).
More information on the rules for taking pensions is given in our pensioners section.
Where can I find more information?
See our tax basics section for a list of more sources of information.